GE Capital in $40m refinance deal

GE Capital Real Estate has beaten the big four banks to a $40 million refinancing deal for a shopping centre in Brisbane owned by developer Consolidated Properties.

Competition is heating up again in the non-banking sector to lend to real estate. While more expensive than the banks, GE refinanced Consolidated Properties’ Northwest Plaza at Everton Park in Brisbane’s north on a 75 per cent loan-to-value ratio.

The big four banks pitching for the deal would only provide 65 per cent loan to value.

“GE Capital Real Estate’s decision is timely and demonstrates their awareness of what is happening in the market," Consolidated Properties managing director Don O’Rorke said.

“We are very bullish about the sector and the commitment of a major non-bank lender such as GE to borrowers with a proven track record validates that view and illustrates the professionalism of their outlook."

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Consolidated acquired the Northwest Plaza neighbourhood centre for $15 million in 2011 and 12 months ago completed a $15 million comprehensive upgrade and refurbishment of the property.

The 9489 square metre centre, on a 3-hectare site in Flockton Street, is fully leased, anchored by a new full-line Woolworths on a 20-year lease alongside 30 specialty stores.

Consolidated plans to hold the property as a long-term asset.

The developer owns or is developing more than $100 million in retail centres in Queensland and northern NSW.

“We have already seen yield compression on quality properties during the past 12 to 18 months and we expect this to continue, which will push sale prices higher," Mr O’Rorke said.

GE Capital Real Estate Australia and New Zealand managing director, Jason Kougellis, said: “Northwest Plaza is one component of our debt strategy in action and is an example of our solid 2013 pipeline."

Groups ranging from Balmain and Quadrant to bigger institutional lenders such as Challenger are all competing for the deals. Challenger is the largest active non-bank lender in Australia focusing on loans from $25 million up to $250 million.

The director of real estate funds management at Challenger, Gerard Hargraves, said Challenger was able to take a lot more hands-on approach than other lenders.

“We don’t compete head-to-head with the major banks due to their ability to price tightly," Mr Hargraves said. “However, we look to compete by providing greater flexibility, structuring terms based on loan performance and providing slightly higher leverage at slightly wider spreads than the banks."

Many of the larger non-bank lenders in the sector are backed by wholesale investors, ranging from the Future Fund and super funds, including Australian Super.

Australian Super, the country’s largest super fund, has been one of the more prominent institutional lenders to move into direct property debt since the credit crisis and has delivered $400 million in mandates to Challenger.